Tax Research Presentation

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Tax Research Presentation

• Gail Richmond, February 2007

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Questions About Tax Research

• Who Does It?
• Tax professionals
• Others
• What Do They Seek?
• AUTHORITY
• When Do They Look?
• Before transaction
• During transaction
• After transaction

• Where Do They Look?
• Print sources
• Microforms
• Electronic sources
• Why Do They Look?
• Planning
• Litigation
• General information
• How Do they Cite What they Find?

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Documents Reviewed

• CCA
• 200034029
• 200431012
• What do these CCAs have in common?
• What else should we ask about CCAs?

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CCA 200034029 Holding

• For taxable years after the year of the
  kidnapping, although the issue is not free from
  doubt, we do not think that the parents meet the
  support test of section 152(a), even if the
  parents continue to maintain a room for the child
  and continue to expend funds searching for the
  child. We do not think that under these
  circumstances, these expenses constitute support.
  Cf. Otmishi v. Commissioner, T.C.M. 1980-472. In
  Otmishi, the court stated that the taxpayer did
  not provide any support for his child in the year
  in issue, although he expended amounts to locate
  his child who had been taken by the childs
  mother.

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CCA 200431012 Holding

• You have requested our views regarding the tax
  consequences of grant payments made under the
  Flood Mitigation Assistance Program (FMA), the
  Pre-Disaster Mitigation Program (PDM), and the
  Hazard Mitigation Grant Program (HMGP) that are
  used to elevate structures located on flood-prone
  properties owned by individuals and businesses.
  The programs are designed to mitigate the adverse
  effects of future disasters. We conclude that the
  foundation elevations provided to property owners
  under all three programs are includible in the
  property owners gross income under 61 of the
  Internal Revenue Code.

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CCA Questions

• What is a CCA?
• Where can we find it?
• What gives the IRS authority to issue it?
• Who determines if the IRS is correct?

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Sources of Law

• PRIMARY
• Legislative
• Executive/Administrative
• Judicial
• SECONDARY
• Commentary

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Legislative
Statutes and treaties have legislative
historiescommittee reports, hearings, floor
debate, etc.
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When Is Constitution Relevant?

• Did Congress have authority for legislation?
• Did administrative agency interpret statute in a
  way that comports with constitution?

The Constitution is not relevant to simple
questions of statutory interpretation.
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Statutes

• Internal Revenue Code (I.R.C.)
• Title 26 U.S.C.--Divided into subtitles,
  chapters, subchapters, parts, subparts, sections,
  subsections, paragraphs, subparagraphs,
  sentences.
• Other Titles of U.S.C.--ERISA rules in Title 42
• Uncodified itemssection 530, other

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Statutes 152

• Title 26 Internal Revenue
• Subtitle A Income Taxes
• Chapter 1Normal Taxes and Surtaxes
• Subchapter B Computation of Taxable Income
• Part V Deductions for Personal Exemptions
• Subpart (none)

Cite as 26 U.S.C. 152 or as I.R.C. 152.
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Statutes Dependents

• How did we find these sections?
• Table of contentsprint or electronic
• Indexprint or electronic
• Word searchelectronic only
• What do we do after we find them?

Read the statute Read an explanation
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Statutes Dependents

• Section 152section number
• Has several relevant subsections dont confuse
  section with subsections
• Subsections we isolate
• 152(a)
• 152(c)
• 152(f)
• We would look for other sections if we cared
  about items such as dependent care credit

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Statutes Dependents 152(a)

• (a) In general. For purposes of this title, the
  term dependent means
• (1) a qualifying child, or
• (2) a qualifying relative

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152(c) Qualifying child.

• For purposes of this section
• (1) In general. The term "qualifying child"
  means, with respect to any taxpayer for any
  taxable year, an individual
• (A) who bears a relationship to the taxpayer
  described in paragraph (2),
• (B) who has the same principal place of abode
  as the taxpayer for more than one-half of such
  taxable year,

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152(f) Other definitions and rules--
(6) Treatment of missing children. (A) In
general. Solely for the purposes referred to in
subparagraph (B), a child of the taxpayer (i)
who is presumed by law enforcement authorities to
have been kidnapped by someone who is not a
member of the family of such child or the
taxpayer, and (ii) who had, for the taxable year
in which the kidnapping occurred, the same
principal place of abode as the taxpayer for more
than one-half of the portion of such year before
the date of the kidnapping, shall be treated as
meeting the requirement of subsection (c)(1)(B)
with respect to a taxpayer for all taxable years
ending during the period that the child is
kidnapped.

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Pub. L. No. 106-554, App. G, 306(a)Community
Renewal Tax Relief Act of 2000

• SEC. 306. TREATMENT OF MISSING CHILDREN WITH
  RESPECT TO CERTAIN TAX BENEFITS.
• (a) IN GENERAL.--Subsection (c) of section 151
  (relating to additional exemption for dependents)
  is amended by adding at the end the following new
  paragraph
• "(6) TREATMENT OF MISSING CHILDREN.--"(A) IN
  GENERAL.--Solely for the purposes referred to in
  subparagraph (B), a child of the taxpayer--"(i)
  who is presumed by law enforcement authorities to
  have been kidnapped by someone who is not a
  member of the family of such child or the
  taxpayer, and"(ii) who was (without regard to
  this paragraph) the dependent of the taxpayer for
  the portion of the taxable year before the date
  of the kidnapping,shall be treated as a
  dependent of the taxpayer for all taxable years
  ending during the period that the child is
  kidnapped."(B) PURPOSES.--Subparagraph (A) shall
  apply solely for purposes of determining--"(i)
  the deduction under this section,"(ii) the
  credit under section 24 (relating to child tax
  credit), and"(iii) whether an individual is a
  surviving spouse or a head of a household (such
  terms are defined in section 2)."(C) COMPARABLE
  TREATMENT FOR EARNED INCOME CREDIT.--For purposes
  of section 32, an individual--"(i) who is
  presumed by law enforcement authorities to have
  been kidnapped by someone who is not a member of
  the family of such individual or the taxpayer,
  and"(ii) who had, for the taxable year in which
  the kidnapping occurred, the same principal place
  of abode as the taxpayer for more than one-half
  of the portion of such year before the date of
  the kidnapping,shall be treated as meeting the
  requirement of section 32(c)(3)(A)(ii) with
  respect to a taxpayer for all taxable years
  ending during the period that the individual is
  kidnapped."(D) TERMINATION OF TREATMENT.--Subpara
  graphs (A) and (C) shall cease to apply as of the
  first taxable year of the taxpayer beginning
  after the calendar year in which there is a
  determination that the child is dead (or, if
  earlier, in which the child would have attained
  age 18).".
• (b) EFFECTIVE DATE.--The amendment made by this
  section shall apply to taxable years ending after
  the date of the enactment of this Act.

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Statutes Past and Pending

• Current law is not necessarily the only law
• When was the child kidnapped?
• If in a prior year, was law different then?
• If worried about a future year
• Is any statutory change pending?

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Administrative/Executive
Authority
Why do we care what they say?
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Code Section 7805

• (a) Authorization
• Except where such authority is expressly given by
  this title to any person other than an officer or
  employee of the Treasury Department, the
  Secretary shall prescribe all needful rules and
  regulations for the enforcement of this title,
  including all rules and regulations as may be
  necessary by reason of any alteration of law in
  relation to internal revenue.

General grant of authority interpretive
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Section 108 Income from Discharge of Indebtedness

• (c) Treatment of discharge of qualified real
  property business indebtedness
• (5) Regulations--The Secretary shall issue such
  regulations as are necessary to carry out this
  subsection, including regulations preventing the
  abuse of this subsection through
  cross-collateralization or other means.

Specific grant of authority legislative
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Regulations

• Treasury Regulations
• Title 26, Code of Federal Regulations for tax
  (other C.F.R. for ERISA, etc.)
• Divided into one chapter, followed by
  subchapters, parts, subparts (but not always),
  sections, subsections, paragraphs, subparagraphs,
  and other subdivisions.

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Regulations Types

• Final issued by Treasury Decision (T.D.) after
  notice comment
• Temp. issued by T.D. before notice/comment
• Prop. issued by Notice of Proposed Rulemaking
  before notice/comment
• In Progress announced in Semiannual Agenda of
  Regs (Fed. Reg.) in Priority Guidance Plan
  http//www.irs.gov/pub/irs-utl/2006-2007pgp.pdf

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Regulations

• Numbering System
• Divided into segments
• Treas. Reg. 1.61-4
• Temp. Treas. Reg. 1.71-1T
• Prop. Treas. Reg. 1.74-1
• Abbreviation indicates type (as does T)
• Number before decimal indicates part of
  regulations (part 1 is Income Tax)
• Number right after decimal indicates Code
• Final number indicates which regulation for that
  Code

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Regulations

• Locating regulationssummary
• Looseleaf services (often right after Code )
• Check for Proposed Regulations some services
  shelve them separately because they are not in
  C.F.R.
• C.F.R. (online and in print)
• Updated only once per year updating services not
  as good as looseleaf services
• Federal Register (online is easiest to use)
• Semiannual Agenda in Fed. Reg. online

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Treas. Reg. 1.151-2 Additional exemptions for
dependents. T.D. 6231, 4/25/57, amend T.D. 7114,
5/17/71.

• Caution The Treasury has not yet amended Reg
  1.151-2 to reflect changes made by 108-311, P.L.
  106-554, P.L. 104-188, P.L. 103-66, P.L. 101-508,
  P.L. 100-647, P.L. 99-514, P.L. 98-369, P.L.
  97-34, P.L. 95-600.
• (a) Section 151(e) allows to a taxpayer an
  exemption for each dependent (as defined in
  section 152) whose gross income (as defined in
  section 61) for the calendar year in which the
  taxable year of the taxpayer begins is less than
  the amount provided in section 151(e)(1)(A)
  applicable to the taxable year of the taxpayer,
  or who is a child of the taxpayer and who

Does this tell you anything useful?
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Rulings Officially Published

• Revenue Rulings and Revenue Procedures
• Provide guidance before regs issued or in lieu of
  regs
• Published in weekly Internal Revenue Bulletin
  (I.R.B.)
• No notice and comment requirements
• Numbered by Year (Rev. Rul. 2007-1 Rev. Proc.
  2007-1)
• Number doesnt indicate Code section
• Must indicate Rev. Rul. or Rev. Proc. because
  duplicate numbering system
• Several items updated at least annually
• Inflation adjustments, ruling request procedures
• I.R.B. also contains Notices and Announcements

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Rulings Private

• Letter Rulings (PLR) and Technical Advice
  Memoranda (TAM)
• Binding only with respect to recipient taxpayer
• IRS makes available because of Freedom of
  Information Act but not in I.R.B.
• Numbered by Year (PLR 200504022)
• Number doesnt indicate Code section
• Common rather than duplicative numbering system
• PLR requested before transaction TAM during
  audit of transaction.

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Chief Counsel Advice 6110(i)(1)

• (1) Chief Counsel Advice defined.
• (A) In general. For purposes of this section, the
  term "Chief Counsel advice" means written advice
  or instruction, under whatever name or
  designation, prepared by any national office
  component of the Office of Chief Counsel which
• (i) is issued to field or service center
  employees of the Service or regional or district
  employees of the Office of Chief Counsel and
• (ii) conveys
• (I) any legal interpretation of a revenue
  provision
• (II) any Internal Revenue Service or Office of
  Chief Counsel position or policy concerning a
  revenue provision or
• (III) any legal interpretation of State law,
  foreign law, or other Federal law relating to the
  assessment or collection of any liability under a
  revenue provision.
• (B) Revenue provision defined. For purposes of
  subparagraph (A), the term "revenue provision"
  means any existing or former internal revenue
  law, regulation, revenue ruling, revenue
  procedure, other published or unpublished
  guidance, or tax treaty, either in general or as
  applied to specific taxpayers or groups of
  specific taxpayers.
• (2) Additional documents treated as Chief
  Counsel advice.
• The Secretary may by regulation provide that
  this section shall apply to any advice or
  instruction prepared and issued by the Office of
  Chief Counsel which is not described in paragraph
  (1) .

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Locating IRS Guidance

• Looseleaf service annotations
• Online search by Code/Regs section or words
• Lexis and Westlaw have tax-specific libraries
• CCH RIA have online tax services BNA and Tax
  Analysts are also tax-specific
• IRS website
• www.irs.gov

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IRS Website
32
IRS Website Search Function
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Westlaw Partial List of IRS Documents
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Judicial Sources

• Who decides if administrative Interpretation is
  correct?
• Congress could change by statute
• Court could reject administrative interpretation
• So must check for court decisions

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Court Structure Trial Appellate
IRS acquiescence, non-acq., AOD also relevant
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Trial Courts

• Tax Court (one judge, no jury, judge comes to
  town) (can litigate without paying tax in
  advance) full court may review and issue
  concurrences/dissents
• District Court (one judge, may have jury)
• Bankruptcy Court (one judge, no jury)
• Court of Federal Claims (one judge, no jury
  usually sits in DC) (used to avoid bad precedent
  in circuit of residence)

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Tax Court

• Opinions
• Regular (published by court in T.C.)
• Memorandum (published commercially as T.C.M. or
  T.C. Memo)
• Small Case (T.C. Summary). Decisions cant be
  appealed and are not precedent.
• All types on Tax Court website but not as
  retrospective as Lexis or Westlaw.
  http//www.ustaxcourt.gov (Regular
  Memo,9/25/95- Summary,1/1/01-)

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Appellate Courts

• Bankruptcy Court ? District court or circuit
  B.A.P. (sometimes direct to Circuit court)
• District Court? Circuit court for residence
• Tax Court ?Circuit court for residence
• Court of Federal Claims ?Federal Circuit
• Circuit courts ?Supreme Court (few cases rarely
  based on const. issues, so Congress can
  overrule by amending statute)

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Precedent

• All courts follow S. Ct decisions. Tax Ct and
  Dist. Ct follow decisions of circuit that will
  hear the appeal
• Tax Ct--different results possible if different
  circuit courts
• Ct of Fed. Claims follows decisions of Fed.
  Circ. taxpayers can sue here to avoid
  unfavorable precedent in home circuit

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Locating Opinions

• Looseleaf services
• Annotations
• Links to full text in online version
• Online searches by Code/Regs section or words in
  looseleaf or at court websites
• Individual courts have limited retrospective
  coverage
• Online searches in Lexis, Westlaw, CCH, RIA,
  etc. services (online more current than CD-ROM)

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Citators

• Print Shepards Shepards Federal Tax (covers
  Tax Court better than regular Shepards) RIA
  Citator CCH Citator
• RIA and CCH are case-name-based
• RIA and Shepards use symbols for outcome and
  syllabus number
• Only Shepards covers statutes and regulations
• Online ?easier to use and more current
  (Shepards, KeyCite, RIA, CCH)

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Looseleaf Services print/electronic

• Looseleaf servicesweekly updating annotations
  for finding authority full text of many items.
  RIA USTR CCH SFTR Mertens, Law of Federal
  Income Taxation Tax Management Portfolios
• Some arranged by Code others by topic
• Cross-references page, , or

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Articles Indices

• Periodicals and IndexesCCH Federal Tax Articles
  WGL Index to Federal Tax Articles (both print
  only)
• Lexis and Westlaw cover articles online
• Current Law Index (Legal Resource Index) doesnt
  go back as far as Index to Legal Periodicals
• Tax Notes (major publication) isnt indexed by
  ILP
• HeinOnline

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Hints

• Use proper citation format in transmitting
  results
• Helps reviewer find cited items
• Avoids confusion
• U.S.T.C. ? T.C.
• PLR, TAM, and many CCA documents share numbering
  system, but only PLR TAM are substantial
  authority for avoiding certain penalties

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Hints

• Erroneous referencesnever refer to the
  Helvering case. He was the Commissioner.
• Note the taxpayers first name as well as last
  it may come in handy if youve made an error on
  the case citation
• For bankruptcy cases, note the trustees name
  some services cite by bankrupt and others by
  trustee
• If using a looseleaf service, indicate whether
  reference is to a page, , or

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Hints

• Dont assume an IRS acq. means they wont
  litigate. It may be an acq. in result only but
  not in reasoning.
• Dont confuse enactment, effective, and sunset
  dates
• Check coverage dates and updating frequency
  before beginning research
• Electronicmay not be retrospective enough
• CD/DVDupdated less frequently than online or
  print services

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Hints

• Dont assume definitions used elsewhere translate
  into tax definitions
• Section 71(b) defines alimony without regard to
  what divorce court calls a payment
• Al-Murshidi v. Commr, T.C. Summary Opinion
  2001-185. Doctor called the surgery cosmetic
  judge allowed deduction.

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Useful Sites

• IRS www.irs.gov
• Treasury (tax policy) http//www.ustreas.gov/
• House Ways Means http//waysandmeans.house.gov/
• Senate Finance http//finance.senate.gov/
• Joint Committee on Taxation http//www.house.gov/j
  ct/
• Tax Court http//www.ustaxcourt.gov/